I have said many times that competing with banks, trying to disrupt banking through new technologies and new business models has a small chance of success. My theory is that, while some incumbents may be slow and blind, I don’t think it is possible for all incumbents, all banks, the industry as a whole, to be slow, dumb and blind.
One disruption path that makes me bullish on modern banks is the partnership between smart banks and smart startups — the “open innovation” principles applied to fintech disruption.
In the most recent example, our friends at Moven have announced this week that TD Bank, one of the largest North American banks, will distribute the Moven mobile app to 3 million of its customers in Canada.
When we invested in Moven in July this year, we believed this will be a successful strategy — while most banks already have a “mobile banking app”, they can also offer tomorrow’s app by partnering with the Moven team and its unparalleled industry thought leadership.
Moven is a mobile application for real-time personal money management, and it can be thought of as a “downloadable bank account”.
The application has all traditional banking information presented in a mobile app, and it adds various gamification features for daily spending and saving behavior intended to optimize savings over time.
In the traditional model of checking/current account, customers need to maintain multiple accounts, multiple balances, multiple transaction histories, and other mechanisms for managing money day-to-day. Those value stores don’t inherently add much value beyond a safe place to store day-to-day cash availability and access to credit linked to a credit card.
The real value that can be derived from a mobile app for a “smart” bank account is to simplify these interactions and reduce the product interactions to actions and engagement, rather than distinct products. The future opportunity for banks is not in the banking product, but in the utility the product brings in real-time facilitated through a mobile phone.
The difference in the Moven app is the imperative – the primary call to action. Rather than just being a value store or telling available balance, the app is now giving customers the ability to improve spend/save balance over time, and provides immediate interactions to stimulate savings at a time one might otherwise make an irrational spending decision. The real-time receipt capability also raises awareness every time a customer spends money and helps them understand behaviors that result in less savings generally (i.e. bad spending habits). This type of feedback loop is counter-intuitive for banks that can only make money off encouraging customer to spend with rewards, cash back and other facilities, but it will become critical for modern mobile customers.
We are glad to see that forward-thinking banks like TD Bank and Westpac in New Zealand have understood the value that a modern mobile banking apps can bring to their customers. Again, I continue to be bullish on smart banks…